Crude oil prices are up sharply today - both WTI and Brent are making significant gains. Yesterday, the commodity strengthened by 2% as fears of trade war fell following comments from Trump. While crude oil sold off sharply last week as traders feared an all-out trade war, the commodity has made back most of its losses this week.
Looking at Brent crude, the commodity made two highs in recent months - one around $70 in late January and the second one also around $70 in late March. For now $70 per barrel appears to be a ceiling for Brent. On the positive side, the commodity has been helped by the likelihood of Trump walking away from the Iran nuclear deal and recent tensions between Iran and Saudi Arabia. On the other hand, decelerating global growth (particularly in Europe), accelerating US supply and recent trade tensions have weighed on crude oil prices. Similar to many other financial assets (e.g. the US dollar, the euro, and gold), crude oil has been trading in a narrow channel since late January. Our short-term outlook on crude is currently neutral, while our medium-term outlook remains bullish.
WTI is currently trading above $64.20. Brent crude is currently above $69.50.
Looking at US crude oil stocks, the most recent EIA figures (April 4) showed falling crude oil stocks and falling refined product inventories. Crude oil inventories were significantly lower than estimates (-4.6m vs. +0.4m expected). Gasoline stocks were down (-1.1m vs. -1.5m expected) while distillate stocks (+0.5m vs. -1.0m expected) were up. Looking at reactions in markets, crude oil prices strengthened following the EIA report.
As crude oil runs out of steam, we are now neutral on the commodity. Note that both WTI and Brent are trading within normal conditions. This is based on technical indicators on the daily chart.
As crude oil rebounds, we are upgrading the commodity to bullish in the medium-term. Looking at various technical indicators on the weekly chart, note that both WTI and Brent are trading within normal conditions.